Question
Debt/Capital Ratio Projected EPS Projected Stock Price Dept/Capital Ratio Projected EPS Projected Stock Price 25% $4.20 $40.00 35% $4.45 $41.50 45% $4.75 $41.25 60% $4.50
| Debt/Capital Ratio Projected EPS Projected Stock Price | ||
| Dept/Capital Ratio | Projected EPS | Projected Stock Price |
| 25% | $4.20 | $40.00 |
| 35% | $4.45 | $41.50 |
| 45% | $4.75 | $41.25 |
| 60% | $4.50 | $40.59 |
| XYZ Inc. is setting its target capital structure. The CFO of XYZ Inc. believes that the optimal debt-to-capital ratio is between 25 percent and 60 percent. Her staff derived following the projections. Various debt levels were considered. | ||
Assuming that the firm uses only debt and common equity, what is XYZ's optimal capital structure? At what debt-to-capital ratio is the company's WACC minimized?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
My Adventures As An Auditor
Authors: Michael Quoter
1st Edition
1079508821, 978-1079508826
